Chapter 12

Designing
and
Administering
Benefits

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Hall 12-1
Chapter 12 Overview

Overview of benefits
Benefit strategy

Legally required benefits

Voluntary benefits
Health and other insurance
Retirement benefits
Paid time off
Employee services
Administering benefits
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Hall 12-2
Managerial Perspective

Benefits:
Important to employees
Powerful recruiting tool
Help retain talented employees
Some affect managerial decisions
(e.g. leave policies)
Important to managers

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Hall 12-3
An Overview of Benefits
Employee benefits:
Indirect compensation
Based on group membership
Provide security for employees and
family
Costly and becoming
costlier
1929: 3% of payroll
2008: 30.3%
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Hall 12-4
How the Benefit Dollar Is Spent

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Benefit Terminology

Contributions
Coinsurance
Copayment
Deductible
Flex/cafeteria
benefits
program

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Hall 12-6
The Cost of Benefits in the U.S.

Federal tax policy

Employers: cost may be deductible
Employees: many free of taxesothers
tax deferred
Federal legislation
Union influence
Cost saving of group plans

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Hall 12-7
The Benefits Strategy

Three parts to Benefits Strategy:

Benefits Mixtotal package
Compensation strategy
Organizations objectives
Characteristics of workforce
Benefit Amount
Flexibility of Benefits

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Hall 12-8
Types of Benefits

Legally required benefits

Health insurance
Retirement
Insurance
Paid time off
Employee services

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Legally Required Benefits
Social Security
Retirement Income
Disability Income
Medicare
Survivor Benefits

Unemployment Insurance
Actively seeking work
Left job involuntarily
Supplemental unemployment benefits
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Legally Required Benefits
Workers Compensation
Claims and premiums steadily rising
Employers fighting back
Role of HR:
o Stress safe work procedures

o Audit workers compensation claims

o Coordinate workers comp and health

insurance benefits
o Encourage those partially disabled to
return under a modified duty plan
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Legally Required Benefits

FLMA Family and Medical Leave Act

Up to 12 weeks unpaid leave
For following reasons:
o Birth of a child

o Adoption of a child

o Care for sick spouse, child or parent

o Employees own serious health needs

Amended to give up to 26 weeks leave to

family of injured military personnel

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Hall 12-12
Voluntary Benefits

Health Insurance
COBRA of 1985
HIPAA
o Portability
o Accountability
Traditional Health Insurance
Health Maintenance Organization
(HMO)
Preferred Provider Organization (PPO)

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Health Insurance Plans

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Voluntary Benefits

Health Savings Account

Pretax and benefits not taxed

Cost containment
Develop self-funded arrangement
Coordinate health insurance in families
with two working spouses
Develop a wellness program

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Hall 12-15
 Retirement Benefits
Employee Retirement Income Security Act
Pensions:
Defined Benefits Plans
Defined Contribution Plans
Cash Balance Plan (Hybrid)
Defined Contribution Plans
401k and 403b
IRA and SEP IRA
Keogh Plan
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Defined Contribution Retirement Plans

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Voluntary Benefits
Life Insurance (term)
Disability insurance
Short and Long-term
Paid Time Off
Sick leave
Vacations
Severance pay
Holiday and other paid
time off
Employee Services
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Administering Benefits

Flexible benefits plans

Modular
Core-plus options
Flexible spending accounts

Challenges with flexible benefits

Adverse selection
Employees who make poor choices
Administrative complexity

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 Administering Benefits

Benefits Communication
Programs increasingly
complex

Employees need to
understand value of
benefits

NASA Photo. Used with permission.

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Hall 12-20
Summary and Conclusions
Design benefits to align with overall
compensation strategy
Benefits provide security for
employees and their families
It is important to:
Provide benefits employees value and
appreciate
Communicate value of benefits to
employees

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2010 by Prentice
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